More Time to Pay Your Tax Bill!
HMRC Time to Pay: 31 Jan is one thing you can worry about less than usual
For many people recently, there hasn’t been much reason to use the “Relieved Face” emoji. We’re a long way from thinking that HMRC and the Treasury have dealt with the crisis well, but we do think that the new “Time to Pay” provision is likely to be of great use to many of our self-employed clients, and we are doing what we can here at the home of tax for actors and creative industry accounting to ensure that as many people as possible understand the new rules.
On 31 Jan 2021, the vast majority of self-employed taxpayers will not be required, as on 31 January in previous years, to pay a lump sum of any balancing payment for 2019/20, plus half the year of 2020/21 on account.
Instead, the “Time to Pay” provisions have been extended to allow you to split the bill into 12 monthly instalments and pay it off throughout 2021 in smaller chunks.
This should mean that nobody faces a very high demand that, as in previous years, would have to be paid on 31 Jan with no ifs or buts and at risk of significant penalties.
The only downside is that HMRC will charge interest on this – but it is a modest rate of 2.6% (at present). Assuming it stays that way, that means it is far, far cheaper than almost any other kind of borrowing or debt. If you deferred a tax bill of £10,000 in this way, the charge over the year would not work out at more than approx. £200.
We expect many of our clients and others to take advantage of these provisions. Here’s how you do it:
Step 1 – submit your tax return for 2019/20 (you must do this before applying)
Step 2 – work out how much you want to pay on 31 Jan 2021 and how much you want to defer to monthly payments over the year. The most you can defer is your 2020/21 payment on account plus balancing payment for 2019/20 (including the 31 July 2020 payment if you chose to defer it during the first lockdown – there’s no interest charged on that before 31 Jan 2021)
Step 3 – make a short online application at the HMRC Time to Pay page
Step 4 – provided you meet some basic criteria – you can’t do this with more than £30K in total, and you must be clear of any other HMRC payment plans – you will automatically be accepted, and can set up a monthly direct debit.
For many people, a slightly more relieved face.
If you have any problems or questions: call us for free advice on 08000 487626, message us on Instagram @accounting4actors or email firstname.lastname@example.org . Our advice on Covid-crisis matters is free and always will be.